After multiple years of double-digit drops, prices for DRAM could stabilize as demand exceeds supply and the number of memory makers dwindles, a research analyst for IC Insights said this week.

The average selling price for DRAM in January jumped by about 13 percent compared to January 2012. That's a sign that prices could stabilize or even increase over this year after incessant price drops over the last few years, said Brian Matas, vice president for market research at IC Insights.

"The DRAM market is extremely volatile. If it just gets a little bit where there is more demand than supply, then prices skyrocket," Matas said.

DRAM demand weakened over the last three years, partly hurt by the slowdown in demand for PCs. Memory makers have been spending less on capital equipment and the output of memory has declined to meet the slowdown in demand. As the market adjusts, it is likely that supply will fall to the point where demand is higher, resulting in price stabilization.

IC Insights is projecting an average DRAM selling price this year of US$1.85 per unit, though prices typically vary on the capacity and memory type. Memory prices hit a low of $1.56 per unit last year, a drop from $1.88 in 2011 and $2.41 in 2010. IC Insights is projecting DRAM sales this year to reach $30.7 billion with shipments of 16.6 billion units.

While DRAM prices are expected to stabilize, the price for nonvolatile NAND flash memory is expected to fall, Matas said. The NAND flash supply currently exceeds demand, but the growing markets for smartphones and tablets could change that. So, manufacturers are ramping up on NAND flash to keep up with demand.

For 2013, IC Insights is projecting NAND flash sales of $30.9 billion, and 8.8 billion in unit shipments, which means double-digit growth in both areas compared to 2012. The research firm is projecting an average selling price of $3.49, a decline of about 7 percent.

"Will that have an impact on pricing for tablets and smartphones? Perhaps not. If anything prices for tablets and smartphones won't go up," Matas said.

Device makers typically do not change mobile device prices, but load in more DRAM or NAND flash instead.

Despite the expected stabilization of DRAM prices, demand is not likely to improve unless the U.S. and European economies recover, Matas said. Asian countries such as China have a smaller share in overall DRAM demand and have less of an impact on the market, Matas said.

Demand for DRAM also took a hit because Windows 8 does not require more minimum memory than Windows 7.

The number of DRAM manufacturers is also declining, with Taiwanese memory makers such as Nanya Technology and Powerchip Technology failing to keep up with competitors in output and manufacturing technology. The market will further consolidate when the third-largest memory maker, Micron, acquires Japanese memory maker Elpida, Matas said. Right now, Samsung is the largest memory maker with around a 40 percent market share, followed by SK Hynix with a mid-20s percentage market share and then followed by Micron and Elpida, according to IC Insights.

IC Insights is projecting desktop demand to remain flat through 2017, with laptop demand increasing at a rate of about 5 percent per year.

One bright spot for DRAM is the growing demand for smartphones and tablets. Low-power DRAM has a 20 percent margin premium compared to PC DRAM, Matas said, adding that a lot of manufacturing capacity is being moved over to low-power memory.

PCs now use DDR3 DRAM, but new DDR4 memory will come out by the end of this year. DDR4 will not provide an immediate boost to the DRAM market this year, but its effects will be felt starting next year, Matas said. DDR4 DRAM is faster and more power-efficient than DDR3. Servers are expected to be the first to get DDR4 memory and initial adopters will pay a premium. Prices of new DRAM usually fall as the memory is used in more computers.